Independent Contractor or Employee? NLRB Returns to Old Test
The National Labor Relations Board issued a press release on January 25 indicating a return to the previous standard for determining if an individual is an employee or independent contractor for purposes of determining the right to organize. This overturns a 2014 ruling by the NLRB and returns to the decades-long “common-law” test. In making this proclamation, “the Board clarified the role entrepreneurial opportunity plays in its determination of independent-contractor status, as the D.C. Circuit has recognized.”
To determine whether a worker is an employee or an independent contractor, the Board considers this non-exhaustive list of factors:
- The extent of control which, by the agreement, the master may exercise over the details of the work.
- Whether or not the one employed is engaged in a distinct occupation or business.
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.
- The skill required in the particular occupation.
- Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
- The length of time for which the person is employed.
- The method of payment, whether by the time or by the job.
- Whether or not the work is part of the regular business of the employer.
- Whether or not the parties believe they are creating the relation of master and servant.
- Whether the principal is or is not in business.
Employers should take care when classifying workers as employees or independent contractors. Independent contractors are not protected under the National Labor Relation Act, which means that they cannot form unions or seek redress of any alleged violations of the act, but employees are. A misclassification could expose employers to significant legal and financial risks not only under NLRB rules, but also with the Department of Labor and IRS. When making this determination, we recommend you consult with legal counsel to ensure that your workers are properly categorized.